Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

The Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) should be read in conjunction with the MD&A included in our
Annual Report on Form 10-K for the year ended November 30, 2013 for important
background information related to our business.

Net revenue in the first quarter of 2014 increased 1.3 percent over the first
quarter of 2013. Sales volume increased 2.0 percent and pricing was flat
compared to last year. The weakening of the Australian dollar, Canadian dollar,
Turkish lira and Indian rupee for the first quarter of 2014 compared to the
first quarter of 2013 were the main drivers of the negative 0.7 percent currency
effect compared to the U.S. dollar. Gross profit margin decreased 40 basis
points primarily driven by $1.3 million of business integration costs that are
not classified as special charges. We incurred special charges, net of $11.7
million for costs related to the Business Integration Project in the first
quarter of 2014 and $5.3 million in the first quarter of 2013.

Net income attributable to H.B. Fuller in the first quarter of 2014 was $14.6
million as compared to $20.7 million in the first quarter of 2013. On a diluted
earnings per share basis, the first quarter of 2014 was $0.28 per share as
compared to $0.41 per share for the same period last year.

We review variances in net revenue in terms of changes related to product
pricing, sales volume and changes in foreign currency exchange rates. The
pricing/sales volume variance is viewed as organic growth. The following table
shows the net revenue variance analysis for the first quarter of 2014 compared
to the same period in 2013:

Organic growth was 2.0 percent in the first quarter of 2014 compared to the
first quarter of 2013. Sales volume increased 2.0 percent and pricing was
unchanged compared to last year. The 2.0 percent organic growth in 2014 was
driven by 16.7 percent growth in Construction Products, 10.8 percent growth in
Asia Pacific and 1.5 percent growth in Americas Adhesives. The majority of the
currency impact was driven by the weakening of the Australian dollar, Canadian
dollar, Indian rupee and Turkish lira compared to the U.S. dollar.

Cost of sales in the first quarter of 2014 compared to first quarter of 2013
increased 1.8 percent. Raw material cost as a percentage of net revenue was 56.6
percent for both years. Other manufacturing costs as a percentage of revenue
increased by 40 basis points compared to last year mainly due to $1.3 million
business integration costs that are not classified as special charges. As a
result, cost of sales as a percentage of net revenue increased 40 basis points
in the first quarter of 2014 compared to the same period last year.

Gross profit in the first quarter of 2014 decreased by $0.4 million and gross
profit margin decreased by 40 basis points compared to the first quarter of
2013. Business integration costs that are not classified as special charges were
the primary reason for the decrease in gross profit.

SG&A expenses for the first quarter of 2014 decreased $0.8 million or 0.9
percent compared to 2013. The 40 basis point decrease in SG&A expense as a
percentage of net revenue was driven by effective cost controls and the ongoing
benefits of the Business Integration Project.

We make SG&A expense plans at the beginning of each fiscal year and barring
significant changes in business conditions or our outlook for the future, we
maintain these spending plans for the entire year. Management routinely monitors
our SG&A spending relative to these fiscal year plans for each operating segment
and for the company overall. We feel it is important to maintain a consistent
spending program in this area as many of the activities within the SG&A category
such as the sales force, technology development, and customer service are
critical elements of our business strategy. For the current year we planned SG&A
expenses to increase relative to last year by an amount slightly less than our
expected growth in net revenue.

The integration of the industrial adhesives business we acquired in March 2012
involves a significant amount of restructuring and capital investment to
optimize the new combined entity. In addition to this acquisition, we announced
our intentions to take a series of actions in our existing EIMEA operating
segment to improve the profitability and future growth prospects of this
operating segment. We have combined these two initiatives into a single project
which we refer to as the "Business Integration Project". During the 13 weeks
ended March 1, 2014 and March 2, 2013, we incurred special charges, net of $11.7
million and $5.3 million respectively, for costs related to the Business
Integration Project.

Acquisition and transformation related costs of $1.7 million for the first
quarter of 2014 and $2.2 million for the first quarter of 2013 include costs
related to organization consulting, financial advisory and legal services
necessary to integrate the acquired business into our existing operating
segments. During the 13 weeks ended March 1, 2014, we incurred workforce
reduction costs of $2.1 million, cash facility exit costs of $3.6 million and
non-cash facility exit costs of $1.5 million and other incremental
transformation related costs of $2.8 million including the cost of personnel
directly working on the integration. During the 13 weeks ended March 2, 2013, we
incurred workforce reduction costs of $0.5 million, cash facility exit costs of
$1.4 million and non-cash facility exit costs of $0.4 million and other
incremental transformation related costs of $0.8 million including the cost of
personnel directly working on the integration.

The benefits of the Business Integration Project are expected to be substantial.
We have plans to create annual cash cost savings and other cash pre-tax profit
improvement benefits aggregating to $90.0 million when the various integration
activities are completed in 2014. By 2015, the Business Integration Project
activities are expected to improve the EBITDA margin of the global business from
just under 11 percent in 2011 to a target level of 15 percent. The project
incorporates many different work streams each of which has a specific timeline
for completion and delivery of benefits. Taking the expected impact of all
initiatives into account, the profit improvement benefits should drive steady
annual improvement in EBITDA margin until the target level is achieved in 2015.

We estimated the total costs of the Business Integration Project to be
approximately $125.0 million. Primarily due to delays in completing the EIMEA
portion of the project, we expect total project costs will exceed this estimate
by an immaterial amount. The following table provides detail of costs incurred
inception-to-date as of March 1, 2014 for the Business Integration Project:

The costs associated with the acquisition integration and the cash costs of the
restructuring are incremental cash outlays that will be funded with existing
cash and cash generated from operations. Non-cash costs are primarily related to
accelerated depreciation of long-lived assets.

The capital expenditures related to the Business Integration Project are
significant. In 2014, we expect to spend approximately $45.0 million to complete
the Business Integration Project. This capital spending forecast, which is
consistent with our original forecast, will be funded from the operating cash
flows of the business and if necessary, from available cash and short-term
borrowing.

When we report our progress on achieving our profit improvement initiatives each
quarter we focus on three key metrics which capture the bulk of the Business
Integration Project objectives: (1) cost savings achieved through workforce
reductions, (2) cost reductions achieved through facility closures and
consolidation and (3) the EBITDA margin of the business relative to our expected
trend over the timeframe of the project.

For the quarter ended March 1, 2014, we achieved cost savings of $4.5 million
related to workforce reductions and $0.9 million related to facility closures
and consolidations. For the quarter ended March 2, 2013, we achieved cost
savings of $3.6 million related to workforce reductions and $1.2 million related
to facility closures and consolidations. The above cost savings represent
benefits from selected activities included in the Business Integration Project.
For the quarter ended March 1, 2014 and March 2, 2013, we achieved EBITDA margin
of 10.5 percent and 10.6 percent, respectively.

Other income (expense), net in the first quarter of 2014 included $1.3 million
of currency translation and re-measurement losses offset by $0.1 million of net
financing income and $0.1 million of interest income. Other income (expense),
net in the first quarter of 2013 included $0.2 million of interest income and
$0.2 million of currency translation and re-measurement gains.

Interest expense in the first quarter of 2014 as compared to same period last
year was lower due to higher capitalized interest related to the Business
Integration Project and to lower average debt balances. We capitalized interest
expense of $1.0 million in the first quarter of 2014 as compared to $0.1 million
in the same period last year.

Income tax expense of $6.5 million in the first quarter of 2014 includes $0.2
million of discrete tax benefits and $2.3 million of tax benefits relating to
special charges for costs related to the Business Integration Project. Excluding
the discrete tax benefits and the effects of items included in special charges,
the overall effective tax rate was 29.0 percent. Without discrete tax benefits
of $0.8 million and the impact of costs related to the Business Integration
Project in the first quarter of 2013, the overall effective tax rate was 29.4
percent.

The net income attributable to H.B. Fuller for the first quarter of 2014 was
$14.6 million compared to $20.7 million for the first quarter of 2013. The first
quarter of 2014 included $11.7 million of special charges, net ($9.4 million
after tax) for costs related to the Business Integration Project. The first
quarter of 2013 included $5.3 million of special charges, net ($4.2 million
after tax) for costs related to the Business Integration Project. The diluted
earnings per share for the first quarter of 2014 was $0.28 per share as compared
to $0.41 per share for the first quarter of 2013.

Operating Segment Results

Through the third quarter of 2013, our business was reported in five operating
segments: North America Adhesives, EIMEA (Europe, India, Middle East and
Africa), Latin America Adhesives, Asia Pacific and Construction Products.
Changes in our management reporting structure during the fourth quarter of 2013
required us to conduct an operating segment assessment in accordance with ASC
Topic 280 "Segment Reporting", to determine our reportable segments. As a result
of this assessment, we now have four reportable segments: Americas Adhesives,
EIMEA, Asia Pacific and Construction Products. Prior periods have been restated
to reflect our new operating segments. Operating results of each of these
segments are regularly reviewed by our chief operating decision maker to make
decisions about resources to be allocated to the segments and assess their
performance.

The tables below provide certain information regarding the net revenue and
segment operating income of each of our operating segments. The pricing/sales
volume variance is viewed as organic growth. For segment evaluation by the chief
operating decision maker, segment operating income is defined as gross profit
less SG&A expenses and excludes special charges, net.

The following table provides a reconciliation of segment operating income to
income before income taxes and income from equity method investments, as
reported on the Condensed Consolidated Statements of Income.

Net revenue increased 0.9 percent in the first quarter of 2014 compared to the
first quarter of 2013. The 1.5 percent increase in organic growth was
attributable to a 2.1 percent increase in sales volume partially offset by a 0.6
percent decrease in pricing. The weaker Canadian dollar compared to the U.S.
dollar resulted in a 0.6 percent decrease in net revenue. As a percentage of net
revenue, raw material cost increased 60 basis points compared to last year,
mainly due to the mix of products sold. All other costs as a percentage of net
revenue were unchanged. Segment operating income decreased 2.8 percent and
segment profit margin as a percentage of net revenue decreased 50 basis points
in the first quarter compared to the first quarter last year.

Net revenue decreased 3.3 percent in the first quarter of 2014 compared to the
first quarter of 2013. The negative organic growth of 3.2 percent was
attributable to a 4.0 percent decrease in sales volume partially offset by 0.8
percent increase in pricing. The negative currency effect of 0.1 percent was a
result of a weaker Turkish lira, Indian rupee and Egyptian pound partially
offset by a stronger Euro compared to the U.S. dollar. Sales volume was down in
core Europe reflecting the generally soft end market conditions across most of
the region, especially in the southern region. Sales volume growth was generated
in the emerging markets, mainly in India. Raw material cost as a percentage of
net revenue decreased 160 basis points in the first quarter compared to the same
quarter last year reflecting the benefits of the Business Integration Project.
Manufacturing cost as a percentage of net revenue was 50 basis points higher
than last year mainly due to business integration costs that are not classified
as special charges. SG&A expenses as a percentage of net revenue declined 20
basis points relative to the prior year. As a result of the above factors,
segment operating income increased 30.4 percent and segment profit margin
increased 130 basis points compared to the first quarter last year.

Net revenue in the first quarter of 2014 increased 7.4 percent compared to the
first quarter last year. The 10.8 percent increase in organic growth was
attributable to a 9.4 percent increase in sales volume and a 1.4 percent
increase in pricing. Markets in China, Australia and Korea showed growth while
Southeast Asia markets were down compared with first quarter last year. Negative
currency effects of 3.4 percent compared to last year are mainly attributable to
Australia and Southeast Asia markets. Raw material costs as a percentage of net
revenue increased 190 basis points compared to the first quarter of last year
mainly due to sales mix. All other costs as a percentage of net revenue
decreased 130 basis points compared to the first quarter of last year driven by
. . .